Oil prices fall on U.S. crude stocks build, but equity rally supports

By Keith Wallis
SINGAPORE, Sept 3 (Reuters) - Oil fell on Thursday on an
unexpected build in U.S. crude stocks and a stronger dollar, but
a recovery in Asian shares after Wall Street posted a near
2-percent gain overnight helped support prices.
Asian investors were focused on the increase in U.S. crude
inventories last week and questioned why supply had not filtered
through to demand, said Jonathan Barratt, chief investment
officer at Sydney's Ayers Alliance.
But sentiment was also supported by the rally on Wall Street
after China again supported its financial markets.

"I think any positive news will help. Maybe we'll see not as
much volatility," Barratt said.
U.S. crude has see-sawed, climbing 27.5 per cent earlier
this week and late last week in the biggest three-day percentage
increase since August 1990, and rebounding from a 6-1/2-year low
last week when West Texas Intermediate tumbled to $37.75 a
barrel.
"I think that was the bifurcation point. A lot of OPEC
economies were starting to falter," Barratt said.
Oil would be well supported at around $42-$44 a barrel, he
said. "If it returns to below that, four or five economies are
going to falter."
"(OPEC production cuts) would only come into play if there
is a sustained fall in oil prices," Barratt said.
Instead oil producers were banking on increased demand from
the upcoming northern winter with refiners shifting production
from gasoline to heating oil.
U.S. crude stocks saw an unexpected gain of 4.7 million
barrels to 455.4 million in the week to Aug. 28, the biggest
one-week rise since April, data from the U.S. Energy Information
Administration showed on Wednesday. Analysts had expected
inventories to remain unchanged. ID:nL1N11810A
Brent crude oil for October delivery LCOc1 dropped 37
cents to $50.13 a barrel as of 0242 GMT, having gained 94 cents
in the previous session.
U.S. crude for October delivery CLc1 fell 45 cents to
$45.80 a barrel, after settling 84 cents higher in the previous
session.
A firmer U.S. dollar, which gained against the yen and a
basket of currencies .DXY , weighed on commodity prices,
including oil on Thursday. A stronger dollar makes oil and
commodities more expensive for holders of other currencies.
Investors are also waiting for the outcome of a European
Central Bank policy meeting later on Thursday to give oil prices
direction.
U.S. non-farm payroll data due on Friday will also give a
guide to the strength of the U.S. economy and impact on oil
prices, while public holidays in China on Thursday and Friday
could subdue markets.